set a marketing budgetHow Fast Do You Want To Grow?

If you’re a startup, marketing is super important. You’ll typically need to spend more in the beginning just to get some traction and get established at a base level. How else will you get found and attract customers if you have no visibility and no track record? You might want to get some advice from a marketing professional about where it’s most important to spend — whether it’s on branding to create a unique, recognizable identity for your business that’s memorable and attractive, or on search engine optimization to get you found online.

We use the Duct Tape Marketing marketing hourglass to plot our marketing tactics to match what’s most important to accomplish. If your business is new, then the first challenge for a new business to to get your ideal client to KNOW you exist.

If your business is already running you likely already have marketing assets of some kind that you can build on and can work toward other sales goals.

Recommended Budgets

Marketing drives revenue, so you will want to set your marketing budget based on how urgent your need is to grow. Here are the Small Business Administration’s recommendations:

  • Established small businesses with revenues less than $5 million should allocate 7% – 8% of gross or projected revenues to marketing.
  • Newer companies who have more to work to do to ramp up should spend more — up to 20% of gross or projected revenue.

“This percentage also assumes you have margins in the range of 10% – 12% after expenses, including marketing. If your margins are lower than this, you might consider eating more of the costs of doing business by lowering your overall margins and allocating additional spending to marketing. It’s a tough call, but your marketing budget should never be based on just what’s left over once all your other business expenses are covered.” —SBA

What To Expect

There are so many variables! We can control what tasks we spend your marketing budget on, and what judgments we make, but meanwhile, competitors are doing things, industries are doing things, and the internet in general is changing. Because there are so many variables, no honest marketer can promise precise results.

Every business has unique challenges and opportunities that affect the outcome of a marketing effort. Variables include things like:

  • Nature of your industry
  • What your business niche is within that industry
  • How well you address your ideal customers
  • The amount of your buyers’ average purchase
  • How frequently buyers can be expected to repeat a purchase
  • Changes in the economy
  • Who you select to market your company

How to Select a Marketing Company

Marketing builds on itself from month to month. We start with your marketing plan, work from month to month using our best judgment, building on results we see happening as the work evolves. We apply our expertise and best practices, discovering what works for you and adjusting direction as we go.

A reputable marketer won’t promise specific results — and if they do, run! Marketing is hard work, and no one has a crystal ball.

Look for a marketing agency who:

  • Provides references from current clients
  • Publishes case studies showing how their work benefitted other clients
  • Creates realistic expectations, not pie-in-the-sky promises
  • Uses their expertise to get the best results possible within the marketing budget
  • Explains their choices and build trust while working with you
  • Will be a responsive and empathetic resource, always in your corner

Measuring Results

Return on Marketing Investment (ROMI)

ROMI is different from Return on Investment (ROI) metrics because marketing is a different kind of investment. Instead of money that is tied up in plants and inventories (often considered capital expenditure), marketing funds are typically risked. Marketing spending is typically expensed in the current period as an operational expenditure. —Wikipedia

ROMI = Gross Profit – Marketing Investment /
Marketing Investment

Customer Lifetime Value (CLV)

Another way to measure marketing success uses CLV to predict the net profit that can be expected to each future relationship with a customer. In its simplest form, CLV is the the dollar value of a customer relationship.

CLV = Customer Lifetime Value – Marketing Investment /
Marketing Investment